ADVWG Applauds the 13 States Investigating Asbestos Bankruptcy Trusts, Calls on Remaining States and Federal Officials to Join

WASHINGTON, May 5, 2017 /PRNewswire/ -- Today the Asbestos Double-Victims Workgroup (ADVWG) is calling on additional state officials and federal authorities to join 13 states investigating whether several large national asbestos bankruptcy trusts are mismanaging funds, including if they failed to reimburse Medicaid and other medical providers as required in federal secondary payer laws.

In March, attorneys general from the states of Alabama, Arkansas, Kansas, Louisiana, Michigan, Montana, Nebraska, Nevada, South Carolina, South Dakota, Utah, West Virginia, and Wisconsin joined forces in issuing a Civil Investigation Demand (CID) to four of the nation's largest bankruptcy trusts. The trusts did not comply with the CID which led to the Utah-based lawsuit asking the court to require compliance.

Those trusts are formed under a law allowing companies with asbestos liability to emerge from a bankruptcy process solvent while creating trusts to pay currents and estimated victims. The AGs are concerned that negligent management of the trusts is cutting the amounts available to help victims, a disproportionate number of whom are veterans, and may not be repaying health care costs. Those victims may be unaware of possible claw-back actions coming down the pike.

The multi-state investigation comes on the heels of the "Garlock" case in North Carolina when a federal judge disclosed that evidence had been suppressed in all 15 cases where he had allowed specific discovery. Both the CID and the Utah lawsuit make clear links to the Garlock case and represent the first law enforcement action on the judge's findings.

Statement from Sara Warner, a founding member and spokesperson for the ADVWG:

"Every day we see health care costs driving national debates, and the strong showing of 13 AGs demonstrates just how concerning this situation is. But sadly, this is not an issue that only pertains to just these states. This is a deep seeded problem and the potential corruption must be fleshed out, and that requires coordination with more states and even federal involvement.

"The core issue is transparency. It is due to a lack of transparency that nobody knows how deep or how costly the fraud might run. Transparent compliance with public quarterly filings is the only answer. If publicly traded companies face similar transparency, why not the trusts?

"This seems a step toward exactly what we feared might happen; asbestos victims are being implicated in the complexities of potential fraud and many of them are going to be military veterans, and we simply must get in front of this potential crisis."

About the Asbestos Double-Victims Workgroup (ADVWG):

The Asbestos Double-Victims Workgroup was formed to explore the idea that current – and future – changes in the asbestos litigation world are going to impact a very specific group of victims of asbestos disease – those who have already gone through the legal system. These individuals and their families are already victims of America's longest-running personal injury challenge; now they might become victims of the very legal system they turned to for justice and they may find themselves under scrutiny and even financial liability for actions taken years ago under advice of their legal representatives.

Background on the Asbestos Double-Victims Workgroup can also be found on our website and a recent article by Sara Warner published on the The Huffington Post.

About the Asbestos Bankruptcy Trusts Complaint:

On March 7, 2017, 13 attorneys general filed a civil lawsuit in Utah to investigate into whether several large national asbestos trusts reimbursed Medicaid and other medical providers when they received settlements and compensated victims. This lawsuit comes after the trusts failed to comply with a "civil investigation demand" letter (see page 13) issued in December 2016. The letter states the following:

"…As chief legal officers for our respective states, we are concerned about potential abuse of the asbestos trusts. Plaintiffs' attorneys are using the trusts to obtain significant monetary recovery for claims, even where they would fail in the tort system. The abuse injures our states by improperly draining the trust assets, precluding future legitimate claimants from relying on the trust, and leaving states with the high cost associated with asbestos-related disease....This evidence suggests that the trusts are not sufficiently rigorous in scrutinizing their claims. This lack of oversight also raises questions as to whether the trusts and claimants attorneys are ensuring that state medical assistance programs are being reimbursed once the trust pays claimants who have also received compensation from those programs…"

The bankruptcy trusts involved include: 

• Armstrong World Industries Asbestos Personal Injury Settlement Trust, a Delaware corporation
• Babcock & Wilcox Asbestos Settlement Trust, a Delaware corporation
• DII Industries, LLC Asbestos PI Trust, a Pennsylvania common law trust
• Owens Corning/Fibreboard Asbestos Personal Injury Trust, a Delaware corporation.
• The litigation comes as the U.S. Congress is considering compelling asbestos bankruptcy trusts to adopt a transparent method of reporting activity. The Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2017, sometimes called the FACT Act, the transparency was included in the class action bill passed by the U.S. House last month (March, 2017).

Additional Resources:

• State AGs Probe Asbestos Bankruptcy Trusts To Recover Medicare Payments - Forbes, March 20, 2017
• Private insurance companies have filed lawsuits against asbestos bankruptcy trusts bringing up the same subrogation issue - Forbes, February 7, 2014

SOURCE Asbestos Double-Victims Workgroup